Hi! China!

China is planning a vast increase in its use of wind and solar power over the next decade and believes it can match Europe by 2020, producing a fifth of its energy needs from renewable sources, a senior Chinese official said today.

— China launches green power revolution to catch up on west, The Guardian

It has long been my considered opinion that the only escape from the horrors of industrial capitalism is to remove the dependency on fossil energy. The process of so doing could save our precious civilisation (oh, i am dripping with sarcasm today…) and, potentially, have several other important knock-on effects.

The introduction of any kind of limit might engender a new attitude towards efficiency. It frustrates me no end that industrial design can live with it’s conscience when it knowing produces products that are inefficient purely to sell more… compounding the problem.

There was going to be more, but my zeal has departed.

[The  title of this post is from here – they’ve already banned me so obviously the feeling is(n’t)  mutual…]

Relationship Reset?

This (fictional) piece is the best from my (limited) weekend reading:

The following fictional conversation never occurred in June 2009 between Treasury Secretary Tim Geithner and a Chinese negotiator named Cheng for the sale of U.S. assets, at least not that we know of. 

 — USA Fire Sale, 2nd Meeting, June 2009: Political capital call, iTulip.

Some of the ‘human rights’ stuff cuts a little close to the bone. It’s almost as if the Americans (i presume to be) writing this with that they had an authoritarian / repressive system to live under… there is, after all, no accounting for puritanical tastes.

Entertaining and informative. Sightseeing on the road to a financial brave new world!

After thought. A lot of what i’m reading reinforces my views that the Chinese (or more broadly Asia) is well aware of what it is doing, and will manage the descent of the West into a far more “equal” set of relationships over a relatively long period of time. Just like the frenzy of doomsaying around peak oil last year, our systems are a lot more flexible that it first appears – stretching them to the point of collapse takes time. This is presumably because we are highly adaptive, on mass easily manipulated, and delusional. It isn’t very encouraging, but it does go some way towards explaining why what appears to be a completely untenable situation can be strung out for so long. The obvious exception to this would be Gaia, which doesn’t really care how it kills us off, just as long as it shakes this fever.

Revenge

Following up on last weekends musing on the possibility of China regarding the US printing money as a de facto default. This article in the FT makes it pretty clear that is exactly what is happening:

China has quietly almost doubled its gold reserves to become the world’s fifth-biggest holder of the precious metal, it emerged on Friday, in a move that signals the revival of bullion after years of fading importance.

In an earlier version of the article, now edited away, was this quote:

Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes. “It’s not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis,” he said. “The financial crisis means the US dollar’s value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage.”

Not much doubt about that then. Rather odd that the quote was edited out.

In other news, Alistair Darling is now my favourite comedian. Managing in his budget to say that the current down turn is serious as the Great Depression, and that the growth resuming by Christmas, is one of the funniest things i think i’ve ever heard a politician say… well, except maybe for that Hatoyama idiot and “his friend in Al-Qaeda”.

Defeat

Interesting things going on in the world of gloom, doom, and despair recently.

The FT is running an article where the US secretary of agriculture basically warns that there is food crunch ahead:

The US agriculture secretary has warned that unless countries take immediate steps to sharply boost agricultural productivity and food output and reduce hunger, the world risks fresh social instability.

“This is not just about food security, this is about national security, it is about environmental security,” he said on the sidelines of the first meeting of the Group of Eight ministers of agriculture.

Charming.

Lots of talk about the US Treasury ‘stress tests’ for the banks. The worst case scenario that they are using is predicated on the headline unemployment number hitting 10.4% by the end of next year (it’s currently 8.5%, and rising fast… it’ll probably hit 10% in a couple of month, maximum) and a decline in house prices of 29% from the start of this year, and over a similar period… they are currently down 22%, and, you guessed it, falling rapidly.

The other issue is that while stress tests might have seemed like a good idea at the time, now that the results have to be released, there are all sorts of dilemmas. If all the banks pass with flying colours were the tests rigged? If some of the banks fail, and are sent off to secure new capital over the next six months, what is going to happen to their shares? Will it provoke runs on the failing banks? Perhaps the results could be kept secret.. that always inspires confidence.

This is looking like a slightly different take on the old, ‘good bank / bad bank’ discussion. The outcome doesn’t stand much chance of being much different… the people will end up assuming the position (all of the risk) while the banks try to hide their losses. What a mess.

This piece by Cynicus Economicus is really worth reading (as are the comments). He makes a pretty good case for believing that the anglo-saxon system of capitalism has run it’s course, and that we are now going to live through a very different (and declining) part of the cycle. I’ve always been intrigued by the idea that societies develop in cycles, going from youthful exuberance, middle aged stability, to staid old age. There seem to be many examples of this… and i’m sure a lot has been written about it. I’m already reading too much.

The other aspect of that piece, that is far more worrying, is the idea that the Chinese have twigged to the idea that Fed printing money <cough> embarking on quantitative easing, is a de facto act of default on the debt. There is evidence out there that China is positioning itself to survive this figurative middle finger to the developing world. 

Graphs like that (from here) make it clear that the Chinese are very aware of the “dollar trap” and, if the reports of them moving to buying up natural resources, precious metals, etc. are to be believed, actively working to insulate themselves from the US attempting to inflate themselves out of debt.

It’s a disturbing prospect on many levels. Defaulting on debts denominated in the worlds reserve currency… seems like a road to terrible instability, economic warfare, and eventually, outright conflict. It’s always said that war is only way out of depression, and it’s easy to see why. Personally, i’m not convinced that it’s inevitable… an odd moment of optimism?

On another positive note, the sheer size of China’s dollar denominated reserves mean that they aren’t going to unduly rock the boat. They’ll be trying to beat an orderly retreat, reallocating into other currencies, and assets. This movement is going to take time. Meaning that those of us with exposure to the dollar might see a period of relative stability until the endgame (a new world reserve currency, that greatly reduces America’s influence) becomes obvious / inevitable.

It’s looks to me that China has their eyes on the prize and is very much playing to win… will be interesting to see if Japan choses to go ‘down with the ship’ or makes like a rat. There is a lot of historic baggage to be lugged around, but surely pragmatism will force Japan to reconsider it’s current position as the outsider in Asia.